At a time when everybody is bemoaning the decline in office products, it’s interesting to see a company that’s still predominantly focused on the traditional stationery space.
That’s not to say that Farook International Stationery (FIS), based in the United Arab Emirates (UAE), hasn’t had its challenges. The financial crisis that led to the near-collapse of the Dubai property market in 2009 also had a ferocious impact on the company’s overall performance, and even five years on, President Farook Rahimtulla expects it to take another 2-3 years before revenues are back up to the company’s top performing year of 2008.
Nevertheless, FIS remains a company that is built firmly around traditional office supplies, stationery and, as part of that, education products. Many of these will be showcased at the fourth Paperworld Middle East show at the beginning of March.
In channel terms, the business can be divided into 67% wholesale and 33% retail. Its roots, however, lie in retail. FIS was founded in 1980 by Farook Rahimtulla as a small stationery shop in Deira, in the emirate of Dubai, selling stationery, greeting cards and gift items.
A year later, the company drew up plans to import office and school stationery for wholesale trading. These plans started to come to fruition in 1982 when it began importing high-quality Japanese and European products through agreements with manufacturers such as Artline and Durable and distributing them in its local markets. Today, FIS is the sole agent in the UAE for 11 well-known office equipment and stationery brands, including tesa, Peach, Apli and Olympia.
In the same year – 1982 – a second retail outlet opened in Bur Dubai, eight times the size of the first store. The company now has a total of 13 retail stores – typically 4,000 sq ft (400 sq m) in size – in the United Arab Emirates, with another one in Muscat in neighbouring Oman.
As is so often the case in emerging markets, FIS took its multichannel approach even further and in 1990 began the manufacturing of office and school stationery products. This venture had its very own set of challenges, says Rahimtulla: “The first five years were quite difficult and our factory made a loss during that period as a result of stiff competition from imported Chinese and Indonesian products. However, once the FIS brand was established as a quality ‘Made in UAE’ product, the manufacturing side became a successful part of the business.”
Indeed, the company added two further factories to its portfolio and now has two in Dubai and one in Sharjah, the third largest emirate in the UAE. Between them, FIS manufactures a broad selection of 2,400 SKUs, split into nine registered brands. These, plus the products from its exclusive distribution agreements with the aforementioned 11 companies – 18,000 SKUs in total – are sold both through its retail network and distributed to its B2B clients.
Big box absence
As a fairly general statement, FIS’s customers comprise some of the big wholesalers in the region, stationery stores and bookshops as well as most of the government ministries and departments, and large national and international corporations.
The latter in particular, ie government offices and large corporations, would typically attract some of the global resellers to the region, especially in an area as affluent as Dubai, but this hasn’t really happened – and is unlikely to anytime soon. One of the reasons for that is the practice of these distribution agreements – they tend to be exclusive and preclude other players from selling the often highly-valued, top industry brands.
Also, says Rahimtulla, any of the large global players wishing to enter the UAE would need a strong and experienced local partner and this might not be that easy to find in a still very traditional and often family-oriented sector.
By the same token, he adds, as a free open market, the government makes it relatively easy for international companies to set up branches in Dubai and that can pose its very own set of challenges: “The free trade status of the UAE has attracted thousands of Indian and Chinese firms to flood the market, dumping their excess inferior-quality stocks and undercutting prices selling mainly to the African continent.”
However, he says that “superior and high-quality ‘Made in UAE’ products do enjoy a good reputation and there are many loyal customers who look for quality rather than just price”.
Entirely typical of the region, where the private sector is very sparsely staffed with local workers, only 5% of the company’s 350-strong workforce are Emirati, the vast bulk of the remaining 95% coming from several African countries, as well as India, Bangladesh, Pakistan, Yemen and the Philippines.
A multichannel approach, together with an international outlook, make for a good combination. FIS uses high-quality European machinery and processes in its factories, but it also prides itself in producing UAE-made goods and that means it can manufacture its own ranges at prices that are considerably cheaper than equivalent and imported high-quality European products – up to 30-40%. So while it cannot compete with prices offered by Chinese, Indian or Indonesian competitors, it’s competitive compared to Europe due to the zero taxation in the UAE.
This price competitiveness also helps, of course, when it comes to exports. As a result of Dubai’s excellent infrastructure, FIS is able to export its ranges to 94 countries, the main markets being the entire Middle East region and the African continent.
With particularly the export market in mind, FIS has expanded from its core focus on office stationery to producing a range of diaries and organisers in several languages, including English, Arabic, French, Russian and Swahili, and these have seen considerable success.
Rahimtulla and his team take a continuous look at developments in the region, with a permanent eye out for spotting future opportunities. This month, for example, in line with the growing trend towards online shopping, FIS is launching its Apple and Android app.
And the future of the company – and the region as a whole – is bright, says Rahimtulla. “The best year for us was 2008 when we achieved record sales and profits. There have been many challenges since, but I am confident that the UAE winning the Expo 2020 in Dubai, combined with the trust in the UAE as a stable growing economy and a safe and peaceful country in the Middle East, will generate business in all sectors in the next few years. In fact, we anticipate around 7% sales growth in 2014 fuelled by the Expo 2020 business and the mini boom we’re currently witnessing in the UAE.”